Mayo Clinic bill called 'massive public subsidy' by Minnesota House tax panel chair

The chair of the House Tax Committee blasted plans to spend more than $500 million in taxpayer funds on infrastructure projects in Rochester to support growth at the Mayo Clinic.

The comments came Tuesday, March 12, during a committee hearing that ultimately came to no conclusion -- the bill will be considered again in the tax committee, perhaps as early as next week.

But Rep. Ann Lenczewski, DFL-Bloomington, said the bill would create a "massive public subsidy" for Mayo Clinic, the iconic health care center that's based in Rochester.

"It's allowing one developer to carve out the income and sales taxes in the city of Rochester for their benefit," Lenczewski said. "That means a tax increase for everyone else to make up for that loss. ... The state has never done this."

Mayo Clinic has outlined a large economic development project called Destination Medical Center that would span 20 years and include $3.5 billion in spending by the clinic and an estimated $2.1 billion from other private investors.

Before pushing forward with the plan, however, clinic officials want the state to commit anywhere from $525 million to $565 million in funds for infrastructure needs in Rochester.

Bill sponsor Rep. Kim Norton, DFL-Rochester, stressed that none of the taxpayer funds called for in the bill would go directly to the Mayo Clinic. If Minnesota isn't willing to assure Mayo Clinic that it will cover the costs of needed infrastructure in Rochester, Norton said, the clinic can opt to focus its growth strategy at its hospitals in Arizona or Florida.

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"People will maybe be happier to visit there than a cold winter in Minnesota," she said.

Infrastructure improvements are needed both to help the clinic recruit and retain talent, Norton said, and to satisfy patients who travel from around the world to Rochester for care.

Earlier this month, the bill got a cool reception in the Senate Judiciary Committee, where legislators said total state money for the project would run in the neighborhood of $1 billion after factoring debt service costs. It has received warmer receptions in other committees.

In her critique Tuesday, Lenczewski focused on a "value capture" mechanism in the bill that would pay off bond debt using a portion of four different state taxes including personal income taxes paid by clinic employees in Rochester.

Bill supporters have said the legislation would only tap tax revenue that's above and beyond the typical growth in tax revenue from the clinic. But Lenczewski maintained the bill is not limited to "extraordinary growth" in tax revenue, but would instead provide "a public subsidy from Minnesotans on the very first dollar" of growth.

Norton said that's not her understanding of how the bill would work. The issue will be hashed out when the committee reconvenes, she said.

Lenczewski predicted the tax committee would not approve the Mayo Clinic bill as it currently stands. In an interview, she referred to the state financing deal for a new football stadium.

"This is more than what the Vikings were asking for," she said.

The Legislature in 2012 approved a $348 million state contribution toward a $975 million Vikings stadium.

Norton said Lenczewski might be surprised by the amount of support for the legislation.

"This is a legislative establishment that requires more than one person's vote," she said.